Balancing the books: US Independents’ 2019 cash flow versus capex

With investors clamoring for capital discipline, how will the US Independents adjust 2019 spending plans in response to volatile oil prices? We expect growth aspirations to be deemphasized as US companies release budgets this month. Cash flow neutrality will remain front and centre of corporate messaging. Investment budgets will be adjusted down if oil price expectations slip. Asset sales could free up capital to an extent. But for most, meaningful high-grading will require cuts to core positions. At prices above US$50/bbl, shareholder distributions will be higher up the capital allocation pecking order than investing for growth. Organic free cash flow – if generated – will play an important role in sustaining share buyback momentum.